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A Star Faces Barriers to Deutsche Bank’s Top Job

LONDON — Hanging on the wall of Anshu Jain’s office, where he runs Deutsche Bank’s worldwide investment banking operations, is a picture of Mr. Jain’s former boss and mentor, Edson V. Mitchell.

A banker with a pied-piper quality, Mr. Mitchell persuaded Mr. Jain and 500 others to leave secure jobs at Merrill Lynch in the mid-1990s to help him transform Deutsche Bank from a slumbering financial institution focused mostly on traditional lending to German companies and individuals into a global powerhouse that generated half its profit from trading and deal-making. At the peak of his success, in late 2000, Mr. Mitchell was killed in a plane crash.

In building Deutsche’s investment bank, Mr. Mitchell formed the template for the global universal bank that has since been emulated — for good and ill — by Citigroup, Royal Bank of Scotland, JPMorgan Chase, UBS and Barclays.

At 48 — about the same age as Mr. Mitchell was when he died — Mr. Jain controls all of his former mentor’s empire, and more. In a given quarter, those operations may produce as much as 90 percent of the banking giant’s profit. Now he is confronting the same obstacle that confounded Mr. Mitchell and prompted him to start looking for another job in the days before he died.

More diplomat than banker, the Swiss-born, German-speaking Mr. Ackermann and the Deutsche board have resisted persistent shareholder demands that the bank put forward a succession plan before Mr. Ackermann’s contract expires in 2013.

All of which has enhanced the view that Mr. Ackermann sees it as his legacy to crown a successor in his own statesmanlike mold — perhaps Axel A. Weber, the recently departed president of the German central bank. There has been much talk of Mr. Weber’s becoming chief executive or coming in to share the job in some way with Mr. Jain.

Ultimately it will be a board decision, and the bank may well decide to anoint Mr. Jain. But the delay, institutional shareholders say, runs the risk of alienating Mr. Jain and might cause him to jump to another investment bank.

“In Germany, no one can imagine an Indian working in London who does not speak German being the C.E.O. of Deutsche Bank,” said Lutz Roehmeyer, a portfolio manager at LBB Invest in Berlin and a large shareholder. “But Deutsche Bank is an investment bank now, and Mr. Jain deserves to run it.”

On a narrow profit and loss calculation, that may be so. But even though Deutsche’s risk-taking was not as outlandish as that of others, the bank was an enthusiastic participant in the United States mortgage boom and it is being sued for $1 billion by the United States government, which contends that its mortgage unit engaged in fraud and deceived regulators to have its loans guaranteed.

While the majority of the alleged fraud took place before Deutsche acquired the mortgage operation, Mr. Ackermann and the Deutsche board may well be wary of choosing a bond and derivatives technician at a time when the practices of all major banks are still being scrutinized.

People who have spoken to Mr. Jain say that he recognizes this is a board decision and that his priority is to keep the profits coming. But, these people say, the delay and the possibility that Mr. Ackermann may not support him for the job have had an effect.

During a brief interview on Tuesday, Mr. Jain took issue with rumors in the market that his relationship with Mr. Ackermann — never close to begin with — had cooled and that he might leave the bank.

“I have been given a huge new opportunity to integrate the investment bank and I am very excited about that,” he said. “As for my relationship with Joe, it is as good as it ever was in almost 15 years of working together.”

Mr. Ackermann declined to comment on the question of his successor, but in the past he has made it clear that the decision to pick the bank’s next leader is the board’s responsibility — with his advice, of course — and that his contract runs until 2013.

By all accounts, Mr. Jain wants to complete the job that Mr. Mitchell and he started 16 years ago. Highly ambitious, with sharp bureaucratic elbows and an even sharper, although impatient, intelligence, he can claim that on his watch Deutsche’s investment banking side did not fall into the trap of so many of its rivals, allowing Deutsche Bank to weather the global financial crisis without assistance, public or private.

Photo

Anshu Jain left Merrill Lynch in the mid-1990s, and now heads the corporate and investment bank at Deutsche Bank.Credit
Alex Domanski/Reuters

Moreover, Deutsche Bank’s United States fixed-income business was, for the first time, ranked No. 1 last year by the closely watched Greenwich Associates investor survey — beating those of institutions like JPMorgan Chase, Morgan Stanley and Bank of America Merrill Lynch in their own backyard.

And while he has not started a public campaign for the job, he has stepped up client visits in Germany and is taking German lessons, clear signs that he is putting his best foot forward for the job.

“There is no doubt that Edson would be proud of him,” said Robert Flohr, a senior search executive at Heidrick & Struggles who was Mr. Mitchell’s main recruiter as he built up the investment bank at Deutsche. “Anshu is the best non-C.E.O. working at a major bank — he is the prince. All he needs is a kingdom.”

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For a banker who has been dead for 10 years and who even during his prime was largely unknown to the outside world, Mr. Mitchell’s legacy remains outsize.

In addition to making it fashionable and lucrative for United States bankers and traders to ply their trade in European banks, Mr. Mitchell paved the way for Robert E. Diamond Jr. — a fellow graduate of Colby College in Maine — to pursue a similar path to the top at Barclays. (He tipped off a headhunter in 1996 that Mr. Diamond would be an ideal man to build up Barclays’ then negligible investment banking business.)

And there are those who still believe that had he not been forced to leave Merrill Lynch in 1995, Mr. Mitchell would have beaten out E. Stanley O’Neal for the top job there, thus preventing the exodus of banking talent that followed him to Deutsche.

“A lot of the bad risk management, bad positions and loss of discipline would not have happened,” said David H. Komansky, a former chief executive at Merrill Lynch. “Losing Edson was a tremendous blow — it was a real setback for Merrill.”

When Mr. Mitchell’s private plane slammed into a mountain in Maine three days before Christmas in 2000, he had not designated a successor — leaving Deutsche and Mr. Ackermann in a panic over who would succeed him.

Mr. Jain, a native of Jaipur, India, started his Wall Street career at Kidder Peabody. At Merrill and then Deutsche, he flourished selling high-value financial products like derivatives and interest rate swaps to hedge funds and other sophisticated investors.

When Mr. Mitchell died, Mr. Jain had recently been promoted to head of global fixed income at Deutsche. He quickly emerged as the leading candidate to succeed his mentor.

But bankers who were involved with the decision-making at the time recall that Mr. Ackermann, who was running the corporate and investment bank at the time, had his doubts.

Mr. Ackermann agreed to give Mr. Jain control of the bond component of Mr. Mitchell’s portfolio, but split off equities, making it clear that he was unwilling to grant Mr. Jain, then 37, the same authority that Mr. Mitchell had enjoyed.

But as his unit succeeded beyond all expectations, Mr. Jain was asked, in 2009, to join the management board. Last July, Mr. Ackermann named Mr. Jain sole head of Deutsche’s corporate and investment bank.

Mr. Jain now oversees 16,000 employees and produced 21 billion euros, or $30.3 billion, in revenue in 2010. Executive recruiters say he would be the No. 1 candidate to run Morgan Stanley, where leadership questions have emerged, or to come in at UBS or Barclays if boards at those banks decide on an outside successor.

So why the reluctance to let him assume the chief executive post at Deutsche Bank?

One answer may be that even though Deutsche survived the financial crisis better than other investment banks, the aftertaste remains sour in Germany.

At the same time, Mr. Jain’s public profile, while growing, remains circumscribed. Highly regarded in the City, London’s financial district, and on Wall Street, in the political salons of Europe he remains mostly unknown.

That said, as long as Mr. Jain’s businesses continue to churn out most of the bank’s profit, it will become all the harder for the Deutsche board to explain to restive shareholders why Mr. Jain should not get the opportunity to run the whole thing.

“Anshu has done a fantastic job,” said Laurence D. Fink, chief executive of the mutual fund giant BlackRock and a shareholder of Deutsche. “He would make a very good chief executive at Deutsche or any other top financial institution.”

A version of this article appears in print on June 15, 2011, on Page B2 of the New York edition with the headline: A Star Faces Barriers to Deutsche Bank’s Top Job. Order Reprints|Today's Paper|Subscribe